Consumption is Using Goods or Services, Know the Characteristics and Factors

Kapanlagi.com - Consumption is certainly a familiar word to us. Consumption is the activity of using goods or services, especially in the household domain. Even though it is at the small level of households, consumption is a very important activity in the economy. In fact, consumption is included as a component in calculating Gross Domestic Product (GDP).

Consumption activity is also the end result of production activities. Because of the importance of consumption activities, economists will generally pay attention to consumption trends in analyzing the condition of the business industry. This is because consumption trends will indicate an assumption of financial models.

In addition to the above description, there are still many interesting things to learn about consumption activities. What are they? Summarized from various sources, here is the review.

1. The Importance of Consumption

Consumption activity is driven by desires or needs for something. It is through this drive that production activities arise, which are carried out to produce goods and services according to consumer needs and desires. When needs are satisfied, consumers feel satisfied, and production activities will continue to increase. As a result, the economy will continue to thrive.

Needs and desires for something are indeed the basis of all economic activities, which then develop into motivation for economic progress. That is why consumption is considered as the beginning and end of all economic activities. It is not surprising that consumption is mentioned as a significant factor in driving the economy.

2. Characteristics of Consumption

Consumption may indeed be a term that we hear every day. In addition, without realizing it, we are also consumers or the main actors in consumption activities. However, in fact, not many people fully understand what consumption is. One way to understand it better is by understanding its characteristics. The characteristics of consumption activities are as follows.

1. Done directly
Consumption activities must be done directly. Because, as we know, one of the goals of consumption is to meet needs and satisfy desires. Therefore, needs and satisfaction can only be achieved if consumers directly obtain what they want and need.

2. Contains benefit value
The second characteristic of consumption is that it must contain benefit value. This means that the type of goods or services needed must be beneficial. For example, food and drinks that are beneficial for human survival.

3. Value of goods or services will decrease
Continuing the second characteristic, every consumed goods and services must have a benefit value. It should be understood that the value in a good or service may decrease or run out. For example, when you have a pen, its ink can run out if used continuously.

4. Goods or services are obtained through purchase or sacrifice
The fourth characteristic is that there must be a sacrifice in obtaining a consumer good. The sacrifice referred to can be through the purchasing process. Because, in the purchasing process, there is a sacrifice, namely the reduction of a certain amount of money.

3. Objectives of Consumption Activities

As mentioned earlier, consumption does play an important role in the overall economic activities. Not only useful for fulfilling needs and desires. Consumption activities are also carried out with several objectives. The objectives of consumption activities are as follows.

1. Fulfilling Wants or Desires
In addition to fulfilling needs, consumption is often done to merely fulfill wants or desires. Because, naturally, the fulfillment of desires can be one way for humans to achieve satisfaction.

2. As Economic Activities
Consumption activities are economic activities. As we know, when we want something, we will buy it. That's when we are engaging in economic activities.

3. To Analyze Individual Behavior
A theory in the Law of Demand, the concept of Consumer Surplus, and the Law of Diminishing Marginal Utility explain that analysts use consumption activities as a material to analyze individual behavior that affects input and output in the economy.

4. Encouraging Production Activities
According to economist Adam Smith, "Consumption is the sole end and purpose of all production." This means that the production of goods and services depends on the level of consumption.

5. As a Formulation of the National Economy
Consumption habits also help the government formulate theories related to the country's economic conditions. Specifically, minimum wage and tax rates are determined based on individual habits.

4. Factors of Consumption

Consumption is indeed a common activity carried out by many people. Although it is already common, consumption activities cannot be done immediately. Apparently, there are several factors that can influence consumption activities. The economic factors are as follows.

1. Social and Economic Factors
Social and economic factors include age, education, and family conditions. These conditions also have an impact on consumption. Because the needs and desires of each social and economic class will also differ.

2. Price of goods and services
It is already a common knowledge that the price of goods and services will greatly affect purchasing power. In other words, it also affects the consumption level. The higher the price of goods and services, the lower the consumption level, and vice versa.

3. Level of Wealth
An individual's level of wealth will also greatly affect their purchasing power for a certain good or service. Additionally, the needs and desires of each person will vary depending on their level of wealth.

4. Taste
Consumption is indeed an economic activity that is almost done by anyone. However, in reality, each individual will carry out consumption differently, even if their age and income are the same. This can be influenced by the different tastes of each individual.

5. Level of Education
The level of education will greatly influence a person's mindset. This includes engaging in consumption activities. The higher a person's education level, the higher their consumption activities usually are. This is because there are more needs to be fulfilled.

6. Interest Rate
According to classical economists, consumption is one of the functions of the interest rate. These economists believe that the interest rate will also encourage savings and reduce consumption.

Those are some reviews on consumption as a fundamental economic activity. Hopefully it is useful and can broaden your knowledge.

(kpl/psp)